Colombia GDP Q2 2017

Colombia: Economic growth inches up in Q2

August 15, 2017

The economy expanded at a marginally faster pace of 1.3% year-on-year in Q2 after a disappointing start in Q1 (+1.2% year-on-year). The slight uptick in GDP growth was largely the result of increased government spending—which was a lifeline for the economy in the first half of the year—and a rebound in fixed investment. It generally met market analysts’ expectations.

Domestic demand expanded modestly and was underpinned by government expenditure, which has been picking up this year ahead of the upcoming presidential election next May. Government consumption expanded 4.2% in annual terms, a marked acceleration over Q1’s 2.6% expansion. In addition, Q2 saw a small pickup in private consumption—which accounts for around three-fifths of GDP—despite a calendar effect from the Easter holiday and soft numbers in retail throughout the quarter (Q2: +1.5% yoy; Q1: +1.4% yoy). Moreover, fixed investment finally rebounded in Q2, recording growth for the first time in two years (Q2: +1.1% yoy; Q1: -0.8% yoy) as work on the 4G road infrastructure project stimulated construction activity.

The external sector continued to perform poorly in Q2, although the contraction in exports moderated to minus 1.7% on a yearly basis (Q1: -4.7% yoy). Imports, on the other hand, swung from contraction to expansion, recording growth of 3.7% on a yearly basis (Q1: -0.4% yoy). All told, the net contribution to growth from the external sector was minus 1.2 percentage points (Q1: minus 0.6 percentage points).

In seasonally-adjusted terms, the economy expanded 0.7% in Q2 after a contraction of 0.3% in Q1 (previously reported: -0.2% SAAR).

Against the backdrop of the adjustment to low oil prices and the residual effects from last year’s prolonged drought, modest growth in Q2 suggests that Colombia’s economy is finally set to pick up in the second half of the year. Panelists participating in the LatinFocus Consensus Forecast project that GDP will expand 2.3% in 2017, which is unchanged from last month’s forecast. In 2018, panelists expect GDP to grow 3.0%.

Author:Lindsey Ice, Economist

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